Sezzle’s Deal With BigCommerce Signals BNPL Is Now Table Stakes For E-Commerce Platforms

On the heels of Square Inc.’s acquisition of Afterpay Ltd., other buy now, pay later providers are jockeying to boost their position in the hotly competitive BNPL market. 

Sezzle Inc. struck a deal Tuesday with e-commerce platform BigCommerce Holdings Inc. to become its preferred BNPL partner. BigCommerce will integrate Sezzle as a payment gateway into its control panel, enabling merchants running on its platform to offer BNPL at checkout. Under the Sezzle model, consumers pay 25% of the balance at the time of purchase, then make three additional installment payments of 25% each over the following six weeks. Square announced Sunday it was acquiring Afterpay for $29 billion.

The move is a signal that BNPL is becoming a necessary business component for e-commerce platforms. “BNPL is a valuable option that should be a part of every e-commerce platform, as it was originally engineered for e-commerce,” says Brian Riley, director of the credit advisory service at Mercator Advisory Group, Marlborough, Mass.

The deal is also expected to expand Sezzle’s reach to younger consumers, who have shown a tendency to gravitate to BNPL. More than 45 million people ages 14 and older in the United States will use BNPL services this year, giving merchants the opportunity to appeal to a new generation of buyers seeking alternative payment methods that help them overcome cash-flow problems or credit-quality issues, says BigCommerce. Overall, 60% of shoppers in the U.S. have used BNPL financing for an online purchase.

“Merchants are increasingly adopting these solutions for their e-commerce stores in response to customer demand, especially younger consumers who find the installment-based model attractive,” Mark Rosales, vice president of payments at BigCommerce, says in a prepared statement.

Austin, Texas-based BigCommerce says it has partnerships with several other buy now, pay later providers, and will continue to evaluate BNPL opportunities to meet merchant needs.

As the number of consumers using BNPL grows, one risk facing providers is their ability to manage risk, particularly as they extend credit to consumers with subprime credit ratings. “That is a concern as many of the loans made by BNPL providers are not bank grade. BNPL providers usually require a light credit check,” Riley says. “The game right now [for BNPL providers] is to book customers and help merchants get a sale, but that will change as more payment networks enter the game.”

Minneapolis-based Sezzle has already taken steps to position itself with payment networks, announcing a partnership with Discover in February.

For its part, Sezzle says that, while a good portion of the consumers who use its service have no credit or low credit scores, it has built a strong risk-management and fraud-prevention model. “Our aim is not to have consumers get out over their skis when it comes to credit,” says Veronica Katz, chief revenue officer for Sezzle, who adds that Sezzle also has a product that helps consumers build their credit scores.